In first budget, Mayor Hodges proposes tax levy increase for Minneapolis

MinnPost photo by Karen Boros
Mayor Hodges: “We must catch up with inflation if we wish to keep up with our basic services, already cut to the bone.”

In her 2015 budget address on Thursday, Minneapolis Mayor Betsy Hodges proposed a 2.4 percent increase in the city’s tax levy, a move that comes after three years when the rate stayed flat or — in the case of 2014 — actually went down. 

“Decreasing the levy last year and holding it at a zero or below inflation for the two years before that helped out residents. It was a good thing to do,” said Hodges during her introduction of the budget.

Hodges explained the need for the increase by outlining the aggressive plan to invest in infrastructure that began in 2008, which created debts that must be paid off beginning in 2015. The budget for next year must also factor in inflation, which has not been part of the process in recent years.

“We must catch up with inflation if we wish to keep up with our basic services, already cut to the bone,” said Hodges. “To do that requires increasing the amount of money that we raise in property taxes.”

The Mayor estimated that, even with the levy increase, half of residential property owners in Minneapolis would see not increase in the city portion of their tax bill, which also includes taxes for Hennepin County and the Minneapolis Public Schools.

“I think the levy is pretty reasonable,” said Council Member Cam Gordon after Hodges spoke. Gordon noted that with the tax base growing, as it is in Minneapolis, that the city has an opportunity to add revenue. “The only way we can actually see the benefit of the tax base growing is to increase the levy.”

“It was not totally unexpected, but I would rather it was closer to 2 percent,” said Council Member Elizabeth Glidden. “The budget address is our first taste of the budget and folks like me are waiting for the details.”

Most of the budget address focused on a department-by-department list of how some money would be spent. The address did not include any comments about programs or staff that might be cut. And it did not include a total for the one-year budget beginning next January.

“I strongly support Chief Janee Harteau’s strategy of getting officers out of squad [cars] and talking directly with our residents and business owners,” said Hodges, who would increase the number of sworn officers by 10 for a total of 860.

The budget includes $960,000 for a class of 18 new police cadets in 2015 and another $1 million to add 40 new Community Service Officers, double the number that are in the current budget.

The CSO’s are typically recruited from Minneapolis high schools to work in community outreach for the Police Department. The CSO program pays a salary, college tuition and provides an opportunity for participants to become sworn officers upon graduation.

“Our Community Service Officers are significantly people of color,” said Hodges. “Laddering them into becoming sworn officers over time will accelerate efforts to make sure that our force looks like the neighborhoods that they serve.” 

The budget for 2015 also includes $1.14 million for video cameras to be worn by police officers, a project that has been studied for the past year and will be launched later this fall as a pilot program. A year ago, the council approved $400,000 to begin the process of outfitting officers with cameras.

The Minneapolis Fire Department will receive $800,000 for two new recruit classes next year. The budget for 2014 included $1.1 million to hire 30 new recruits.

Both the police and the fire department have large numbers of employees eligible to retire in the next 10 years.

The proposed budget also includes provisions to add workers in departments that serve the construction industry, which is having a very busy year. “Yesterday we learned that the city has exceeded $1 billion in permitted work,” said Hodges.  Last year the city did not reach the $1 billion level in building and construction permits until October. Hitting that level in 2014 marks the third year in a row at the $1 billion level. Minneapolis, we are in a building boom.”

The budget also includes $3.5 million for the city portion of the cost of rebuilding Nicollet Mall. Last spring the legislature approved $20 million for re-design of the Mall as part of the state’s bonding bill.

Hodges began her speech by reflecting back to her campaign for mayor a year ago when she ran on a platform of a well-run city, increased growth and equity. During that campaign, she talked about eliminating the gaps that separate white residents from those of color when it comes to opportunities in education, employment and housing. 

“Now we get to put our money where our votes were,” said Hodges at the start of her speech. “Budgets are a fine grained detailed way to show the community that we meant what we said.  Budgets are where our money meets our values.”

She started by adding two positions in the City Coordinators Office that will focus on equity in every department of the city.  She would also increase the fund for affordable housing by $1 million, add $70,000 for an education program for parents of teenagers, and an additional $55,000 for the Youth Coordinating Board which serves young people facing challenges in housing, education and social outcomes.

The budget also adds one worker to the elections and voter services staff to do outreach and education.

Work on the 2015 budget will begin August 27th, when the Board of Estimate and Taxation conducts a public hearing followed by a vote on the tax levy September 17.  The board is responsible for setting the maximum tax levy for the city.

The City Council will also begin department-by-department hearings soon. In years past, only members of the Ways and Means Committee were allowed to vote on budget items during the hearing process. Those not serving on Ways and Means could not vote or amend the budget until the final meeting when the full council met for a final vote.

But this year the committee structure was changed to allow every council member to serve on the budget committee and make changes before the council gathers for a final vote.

“I think you may see more activity during the budget hearings,” said Council President Barb Johnson following the mayor’s budget presentation. Johnson added that she wanted more information about the budget than what was presented in the speech.  “I think we have to look a little closer and do a deeper dive to find out exactly what the overall revenue picture is.” 

Traditionally the budget process will end in mid-December with a public hearing on the proposal followed by a vote of the council  members.

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Comments (19)

  1. Submitted by Thomas Swift on 08/15/2014 - 09:17 am.

    The Democratic led legislature, acting on requests from a Democratic governor, just poured Billions back into LGA, which the Republican led legislature had cut to balance the budget, which the Democratic party had assured people was the sole cause of their sky high property taxes.

    Now the Democratic mayors of the two largest cities in the state are raising property taxes; again.

    Can we expect an apology from Mark Dayton, Tom Bakk and Paul Thissen to be shortly forthcoming?

  2. Submitted by mark wallek on 08/15/2014 - 09:23 am.

    Of course she does

    Perhaps the mayor can, with uber sensitivity to how income affects personal image and well being, arrange for a property tax increase for those whose incomes actually have grown over the past decade. And get that expensive lightrail northeast up and running, because electric busses are just not as cute and to financially palatable.

    • Submitted by Pavel Yankovic on 08/15/2014 - 04:20 pm.

      Why?

      Why increase property tax on those whose income has grown? Property tax is just that. My income fluctuates year to year. My property tax doesn’t. It just keeps going up.

  3. Submitted by Ray Schoch on 08/15/2014 - 10:23 am.

    Hmmm

    When I asked him directly last year, former Mayor Ryback assured me that I would personally benefit from more residents in Minneapolis because my taxes would go down. I was suspicious of that claim, and Mayor Hodges has now provided a reason for that suspicion. Now that Minneapolis is back above 400,000 residents, the new mayor proposes a tax increase rather than a decrease. Those of us on fixed incomes are never happy to see taxes go up.

    Property taxes in Minneapolis are among the 50 highest municipal rates in the country. On the other hand, six of the top 15 in that group of the 50 highest municipal rates are in Texas, which suggests to me that there ain’t no free lunch. If you want paved streets, a reasonable sewer system, clean water, police and fire protection, and other municipal services, they have to be paid for in some fashion. Places like Texas with very low or nonexistent personal income taxes pay for services via property taxes. Other places, like Colorado, have low property taxes, but services are paid for via sales taxes. Still other places raise the same kind of funding via income taxes, and most use a combination of the three.

    Meh. It could be worse. Inflation is becoming a factor once again, and the city has maintained reasonable levels of service despite regular budgetary cutbacks since I arrived 5 years ago. A brief glance to the east might be instructive. If we were talking Milwaukee instead of Minneapolis, taxes on the same residential properties would be 40 to 45 percent higher, according to the study by the Urban Land Institute and the Center for Fiscal Responsibility that I’ve quoted in previous posts here.

  4. Submitted by Jay Willemssen on 08/15/2014 - 11:57 am.

    The LGA canard

    The state of Minnesota has a handy database of LGA outlays from 1986 to the certified amount for 2015.

    One can use that data to easily calculate a city’s share of the total LGA pool and track it over time.

    St. Paul’s share has declined 6.1% over that period, while that of Minneapolis has declined 28.6%.

    Of the 853 cities that received LGA in 1986, St. Paul ranks 592 and Minneapolis ranks 663 in terms of change in LGA share.

    In terms of per capita LGA in Minnesota, St. Paul ranks 423 and Minneapolis ranks 452.

    Real dollar per capita LGA to Minneapolis has declined 52% from 2002 to 2014.

    • Submitted by Thomas Swift on 08/15/2014 - 02:56 pm.

      Well Jay, I offered a lot of facts and figures from the LGA instance report, but evidently they offended the censor.

      So, suffice it to say that Minneapolis and St. Paul get the lion’s share of the money. St. Paul gets almost as much as Minneapolis despite the fact it has roughly 1/2 the population, turning your per capita straw man into a defenestration victim.

      Also, I’d be remiss not to note Bloomington, with a very large population, gets $0, and yet the street lights somehow manage to stay lit at night.

      • Submitted by Ray Schoch on 08/15/2014 - 04:46 pm.

        Straw men

        Just out of curiosity, what is it about the sentence “…Real dollar per capita LGA to Minneapolis has declined 52% from 2002 to 2014.” that makes it a ‘straw man’? Assuming the numbers to be accurate, reduced funding from the state – especially if the lion’s share of LGA money goes to the two biggest cities – would likely lead to higher tax rates in order to balance the budget unless services were cut to deal with the shortfall. If LGA funding has declined by half in the dozen years since Mr. Pawlenty took office, a responsible mayor would look for efficiencies first, and that seems to have been done via program and personnel cutbacks, but eventually, maintaining services requires an increase in funding.

        Also, as someone who visited the Mall of America when my son first moved here more than a decade ago, but has never shopped there, and who has no contacts within Bloomington municipal government, wouldn’t the MOA make a significant contribution to Bloomington’s bottom line, either through a share of sales taxes, or as part of whatever deal was struck years ago that resulted in the MOA being built where it is? Perhaps Bloomington and some other affluent suburbs get $0 in LGA money because, frankly, they’re doing rather well without it. I don’t know that to be the case, and haven’t investigated it, but it does seem a plausible possibility.

      • Submitted by Bill Gleason on 08/15/2014 - 04:54 pm.

        Maybe giving some links would be useful?

        link: http://ow.ly/AnvOX
        Which Minnesota cities will receive largest LGA payouts?

        According to this source, the per capita LGA assistance to the citizens of Minneapolis is
        $198.83 in 2014. Peruse the data and it is easy to find many cities in Minnesota where the per capita assistance is much higher.

        It is rather easy to make obfuscatory remarks about LGA because it is a complex subject. Back when the GOP was in control and cut LGA one local right wing radio host – Mitch Berg – foolishly claimed that there was no relationship between LGA legislation and property taxes because nowhere in the legislation was it stated that property taxes had to go up. Local governments should just suck it up and live within their means.

        And of course now that LGA is increased, the right wing claims that property taxes should not be going up.

        I guess it just depends on whose ox is being gored.

        • Submitted by Thomas Swift on 08/15/2014 - 06:10 pm.

          Well Bill, as I say my first response was replete with the exact figures and a link to the LGA report. I have no idea why it upset the censor; I’ve given up trying to figure the rules out.

          Per capita. If that was the gold standard measure, then why does St. Paul, with 1/2 Minneapolis’ population get >3/4 the LGA Minneapolis gets? There is no logical answer, please spare us your speculations.

          Finally, until their insatiable appetite for profligate spending overflows their city limits and grasps at the wallets of the rest of the state, I’m happy to see the people who voted for Hodges and Coleman pay for their decisions. I say pour it on baby!

          • Submitted by Bill Gleason on 08/15/2014 - 07:38 pm.

            Read my link, Mr. Swift

            You are very confused about how LGA is allocated, Mr. Swift.

            “Why does St. Paul with 1/2 Minneapolis population get >3/4 of the LGA Minneapolis gets?”

            In fact, St. Paul gets MORE LGA than Minneapolis. LGA does NOT track with population.

            Per capita is not “the gold standard measure.” Calculating per capita, does show however, that the amount of money Minneapolis and St. Paul get from LGA is NOT out of line with the amount of money the citizens of these cities get from LGA funding when compared to those of other cities in the state. Please see Mr. Willemessen’s relevant comment below.

            Why didn’t MinnPost allow you to post links to back up your claims? I haven’t had this problem, so perhaps some other parts of your comment were deemed objectionable. I am sure that you can post a comment with links in support of your claims if you do it in a civil manner.

  5. Submitted by Jay Willemssen on 08/15/2014 - 04:44 pm.

    Math

    For 2014 LGA per capita in Minnesota, St. Paul is slightly below the 51st percentile and Minneapolis is slightly above the 47th percentile, ie, both pretty much dab smack in the middle of the distribution. Very odd for someone to get agitated about the norms and not outliers.

    Also, people who believe Bloomington doesn’t get LGA perhaps should do some research with current data before making such an erroneous claim.

    There is also no correlation between the ideological bent of a county and its LGA amount, which of course is expected, since LGA comes from a formula (with limited exceptions to specific regional centers), not from patronage.

    Like I said before – canard.

    • Submitted by Thomas Swift on 08/15/2014 - 08:36 pm.

      Gonna take another try with facts and sources.

      http://www.revenue.state.mn.us/local_gov/prop_tax_admin/aclb/lga_14_amounts.pdf

      2013: BLOOMINGTON
      $0.00

      What formula explains this?

      MINNEAPOLIS
      2013: $64,142,268.00
      2014: $76,066,082.00
      >18% increase

      ST PAUL
      2013: $50,320,488.00
      2014: $60,424,253.00
      20% increase

      St. Paul has roughly 1/2 the population of Minneapolis….schwoops, there goes that beloved per capita justification right out the window again.

      • Submitted by Bill Gleason on 08/16/2014 - 07:43 am.

        Your own link indicates that in 2014 Bloomington

        got $403,952 in LGA money.

        Curious that in your numbers above 2014 is given for Minneapolis and St. Paul, but not Bloomington.

        Why?

        And by the way, according to the US Census (2012) data

        Minneapolis 392,888
        St. Paul 290,770

        which works out to 74%, rather imprecisely characterized as “roughly half.”

  6. Submitted by Jay Willemssen on 08/15/2014 - 05:02 pm.

    St. Paul has 74% of the population of Minneapolis

    That’s one rough “half”.

  7. Submitted by Jay Willemssen on 08/16/2014 - 09:17 am.

    Local Government Aid to 1986

    For those here interested in the facts, the lookup tool has gross and per capita amounts by city and county for 2002 to 2014.

    http://www.house.leg.state.mn.us/hrd/lgahist.aspx

    Detailed 2014 and 2015 data can be found at the following, along with a link to historical data by city back from 1986-2015.

    http://www.revenue.state.mn.us/local_gov/prop_tax_admin/Pages/lga.aspx
    http://www.revenue.state.mn.us/propertytax/reports/aids_lgahistory.xls

    Both of these resources are easily found by searching for lga + minnesota. They are the top 2 results.

    Under the new program formula (enacted in 2003), both Minneapolis and St. Paul per capita LGA have steadily declined relative to the all-cities median. From 2008-2014, both cities have been below the median, with the exception of 2009 ($13 and $6 above, respectively) and in 2014 for St. Paul, at $3 above the median.

    It should be self-evident why per capita figures are used when comparing a dataset of tiny little cities with very large cities, just as one does not get useful information from comparing gross numbers from tiny little countries with very large ones. It’s standard, common sense statistical practice.

  8. Submitted by Dennis Wagner on 08/16/2014 - 09:48 am.

    Tax Hike Really? Please keep it in perspective.

    Lets see, say your property taxes are $3600/year 2.4% increase = $86.40 /52 we are talking ~$1.66 per week. Gas has been ranging $3.59-3.29 last 4 months or so ~ .30 per Gallon swing, typical driver ~ 1250 miles per month say 25 mpg average =50 Gallons/month = $15/month $15/4=$3.75/week more than 2X the potential tax increase, with no additional benefit.
    Seems to be a lot of misplaced whining here!

    It isn’t the increase its how its spent and what we get for it, typical blind thinking about acquisition cost, not benefit analysis!

  9. Submitted by Michael Goldner on 08/17/2014 - 07:29 am.

    paying our way

    We live in the Mill City area of downtown Minneapolis and have done for over 15 years. We love our neighborhood, our city and our condominium along the Mississippi and down the block from the Guthrie and a short walk to the new stadium and a bit longer walk to Target Field and the Twins. You get the point.

    While we are very concerned about rising taxes, we are retired, we must acknowledge that an increase in the levy is only a small part of the increase in taxes. The bigger part is from significant increase in the value of our condominium. We cannot in fairness expect to have it both ways. Living the good life down on the river, means that we must expect to pay a genuinely fair share of the cost of running the city.

    Whoever thought it would be less expensive to live here, as population increased, was not being realistic.

  10. Submitted by Paul Udstrand on 08/22/2014 - 08:51 am.

    The only thing that bugs me..

    I don’t live in MPLS so I don’t have a huge dog in this race but under Rybak services and maintenance deteriorated because of revenue shortages. Some of that was loss of ALG money, but Rybak promised that the stadium deal was going to be a great financial boon to the city, he actually claimed at one point that the stadium deal might reduce property taxes, and that was pretty much an outright lie. The cities taking on hundreds of millions of dollars of additional financial burdens in order to service billionaires who don’t even live in MPLS (or in one case even the state). Rybak made the deal promising he’d be accountable come election time and then ducked out. Hodges got stuck with Rybak’s deals and is simply doing what she needs to do. Rybak didn’t do anything illegal as far as I know, but the stadium deal was a product of a corrupted political system that made an New Jersey billionaire instead of the people of MPLS Rybak’s primary constituent. What’s done is done and they would have had to raise property taxes eventually anyways, but let’s not drop it all on Hodges shoulders. I wish Hodges luck and hope she didn’t buy into all the promises Rybak made regarding the stadiums and arenas, if she did she’s in for a rude awakening. MPLS has historically gotten screwed the most by stadium and arena deals. Currently they have a net loss of $2 million a year and Rybak quadrupled three time over down on that in order to get the Vikings a new stadium.

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